Industries of all kinds – those that make clothing or cars or semi-conductors or software – have long clustered together, whether in the same neighborhood or a specific city. And the benefits of this kind of agglomeration are thought to be many. Similar companies located near each other can share the same production resources, producing economies of scale. Competing workers can share adjacent bar stools, producing new ideas and faster innovation. Companies can feed from the same talent pool, snagging workers from each other.
"We go on and on about how important economic clusters are, whether in fashion or on Wall Street, and we talk about, 'oh proximity is important, density is important,'" says Elizabeth Currid-Halkett, an associate professor at USC's Sol Price School of Public Policy. "But what do we mean by that?"
Sarah Williams, an assistant professor at MIT, had heard a very similar argument from workers in New York City's Garment District, where the perpetual fear of rezoning threatens to disperse what remains of the city's apparel industry. "Does space really matter to an industry that much?" Williams asks.
What do fashion designers in the Garment District do all day that explains why they need to be near each other?
Of all of the ways that economists have studied agglomeration, it's been difficult to answer this last question, to follow the real-time movements of workers within an industry cluster to figure out exactly how they interact. But that was before smartphones. Williams and Currid-Halkett have now tapped the simplest of social media apps, Foursquare, to follow fashion designers around New York. And their results, just published in the journal PLOS ONE, offer a glimpse into the mechanics of a key economic idea – proximity matters – in a way that we've never been able to visualize before.
For two weeks back in 2011, they followed 77 fashion designers from 34 studios based either in the Garment District or the metro region. Over this period, the designers visited 287 separate but related businesses, checking in on Foursquare more than 2,000 times.
Williams and Currid-Halkett modeled all of the trips the designers took in the below video that spans the study period. Two patterns jump out: Intense interaction still takes place throughout these few square blocks, as designers bounce between manufacturing and wholesale and supply shops, despite the fact that New York's Garment District has lost nearly 90 percent of the apparel businesses that were located here in 1980.
And the location of these essential pieces of the production chain draws in designers based elsewhere in the region.
This picture implies that you can't remove the manufacturing facilities from the district, while keeping the design studios there (one of the potential consequences of rezoning). If anything, it's the manufacturing and production houses that hold this agglomeration together, enabling even designers who live in Brooklyn to come make all of their stops in one place.
Cultural industries, in particular, Currid-Halkett argues, also rely on proximity for another reason. The industry is driven by taste, and someone needs to define it.
"Why is a Rothko more valuable than some artist in Brooklyn?" she asks. "It is really a matter of taste, of a critical mass of critics and gatekeepers that spend time together evaluating what is good. You get this whole amalgamation of people that essentially have to be physically near each other to evaluate work, to generate value, to share information about the work."
No doubt a similar study of New York's Financial District would show different patterns of movement and interaction. That industry is built around guarding information, not sharing it. Silicon Valley might look different, too, in fascinating ways. The geography there is much larger, for one thing, spanning square miles, not a few square blocks. Silicon Valley is made up of self-contained campuses where coworkers can eat meals and take breaks and socialize within the same complex. We likely wouldn't see tech workers popping in and out of each others' offices all day, or even encountering each other at the same shared Silicon Valley sandwich shops and bars. They also have less need than fashion designers to co-locate with shared production facilities.
And yet, technology is an industry that is intensely clustered, too – although it may cluster for slightly different reasons, and in different ways, than textile mills during the 19th century.
"At the time it was more physical, it was this sharing of actual resources and labor pools that really produced economies of scale," Currid-Halkett says. "Now we say knowledge drives the economy. And yet we see clustering now more than ever, even though in theory my knowledge can be given to Sarah over the phone."
Knowledge-intensive industries in particular today are hyper-clustered.
"You’re sharing resources," Currid-Halkett says. "it's just different resources than back in 1850."